Even as the overall VC market slows during the second half of 2022, investments in climate tech — particularly technologies that could enable green hydrogen to help decarbonize heavy industry and other big emitters — continue to add up.
This week, Aurora Hydrogen, a pyrolysis startup in Edmonton, Alberta, disclosed $10 million in Series A funding led by Energy Innovation Capital and including some well-known fossil fuels funds including Shell Ventures and Chevron Technology Ventures. Its pitch: the approach uses 80 percent less electricity than electrolysis, another "clean" hydrogen approach. There are concerns, however, that the technology may enable more tar sands development.
Sydney, Australia-based electrolyzer company Hysata announced an even larger early round of about $29.3 million. Its backers hail primarily from Australia, led by Virescent Ventures, but also include Vestas Ventures, part of the Danish wind company.
Both companies plan to use their new funding for scaling up pilot facilities.
One of the biggest rounds so far this summer was the $198 million in Series B equity and venture debt for Boston-based startup Electric Hydrogen, which is developing an electrolyzer for creating "fossil-free hydrogen." The round was led by Fifth Wall Climate Tech and a group of high-profile climate tech investors including Amazon’s Climate Pledge Fund, Mitsubishi Heavy Industries, Honeywell, Cosan, Equinor Ventures, Rio Tinto, Breakthrough Energy Ventures and Energy Impact Partners, among others.
Electric Hydrogen is focused on addressing carbon dioxide emissions related large and crucial industries, such as steel production, mining and agriculture — among the most difficult sectors to decarbonize. Its electrolysis process runs on renewable power, the hallmark of so-called green hydrogen technologies. The company’s executive team includes former executives from First Solar, Tesla and Breakthrough Energy.
It is unsurprising a company such as Amazon, with fleets of delivery trucks, vans and planes, might be interested in more sustainable and cost-effective methods of energy related to transportation. "Amazon has a long track record of using hydrogen in their forklifts trucks in their logistics centers," said Patrick Molloy, manager for the climate-aligned industries program at RMI. Despite its many investments in climate technologies, Amazon’s overall emissions rose 18 percent in 2021.
Electric Hydrogen produces hydrogen using electrolyzer technology, a process by which hydrogen is created using electrolysis, or when electricity is used to split hydrogen and water molecules. Electrolyzer technology can generate large amounts of hydrogen cheaply. Electric Hydrogen says its "industrial scale systems" will make decarbonization "an inevitability" for industrial emitters.
Molloy agrees. "We are at a stage, particularly for green hydrogen, where deployment of electrolyzer systems and improvement of the technology drives the cost down and improves the overall efficiency of production, and makes it affordable and applicable to hard-to-abate sectors," he said. "This isn't about hydrogen becoming ubiquitous, this is about hydrogen being affordable, relative to the sectors where it has best application and can accelerate decarbonization with a view to net zero."
Companies such as Electric Hydrogen have their work cut out. According to a 2019 report by the International Energy Agency (IEA), hydrogen produced through electrolysis only accounts for 0.1 percent of hydrogen production globally. Despite this, the IEA report was quick to note growing interest in renewable sources, including electric hydrogen, due to decreasing costs.
The decreasing costs go hand-in-hand with increasing investments in green hydrogen technology. Molloy sees the interest by major companies as a positive development.
"It’s really valuable to see folks actually investing money to build projects [that] deploy the technology so that the technology improves, the production chain actually improves in terms of efficiency, that it becomes a low-cost solution beyond even where it is today," he said.
If project deployment in critical areas comes to fruition, it is possible green hydrogen production methods, such as electrolyzer or fuel cell technologies, will become competitive, Molloy explained. "Maybe you can actually deliver a solution that is zero carbon that people want but maybe haven't been able to afford or maybe the technology hasn't been where it needs to be, so there's a kind of domino effect here, as we start to see deployment."
Electric Hydrogen isn’t the only company working to help foster industrial decarbonization through electrolyzer technology usage. On July 13, Amazon’s Climate Pledge Fund disclosed it had also invested in Sunfire, a German-based company that uses electrolyzer technology to produce hydrogen. In a statement, Amazon Vice President of Worldwide Sustainability Kara Hurst stated that Amazon is "proud to be investing in visionary companies like Electric Hydrogen and Sunfire that are developing vital technology for the deployment of green hydrogen to help decarbonize hard-to-abate sectors."
Beyond Electric Hydrogen and Sunfire, a number of other startups are exploring the green hydrogen sector using different approaches. Like the two electrolyzer companies, these companies have generated a considerable amount of interest from investors and have secured major investments.
Danish company Green Hydrogen Systems provides on-site electrolysis to producers of hydrogen industrial facilities and fueling stations, as well as to power various types of installations. The company said it has created a hydrogen generation system that produces 99.9 percent clean energy. Green Hydrogen Systems was estimated to be worth $293 million in 2021. The company reported raising $34.3 million over three funding cycles in 2019 and 2020.
Another green hydrogen company with considerable backing is Heliogen. Heliogen captures concentrated sunlight using heliostats, which reflect sunlight onto a tower called the Sunlight Refinery. From there, the sunlight is used to produce hydrogen and syngas, or synthetic gas created from a mixture of carbon monoxide, hydrogen, carbon dioxide and methane. The California company has $332.6 million worth of funding. According to its website, Heliogen intends to offer low-cost energy "in the form of heat, power, or hydrogen fuel."
Israeli company H2Pro splits water into hydrogen using E-TAC, which it describes as a "revolutionary method for producing green hydrogen … that is over 95 percent efficient, safe and cost-competitive with fossil fuel hydrogen." The company received $22 million during a fundraising drive last year, which included backing by Breakthrough Energy and Hyundai, among others. This year, it received $75 million worth of investments, notably from Breakthrough Energy yet again, as well steel and mining company ArcelorMittal.
"There are an awful lot of folks all over the world, working on various technology strains and streams," said RMI’s Patrick Molloy. "There are a lot of startups. There are a lot of very, very interesting emerging technology, solutions and approaches."
Molloy highlighted ZeroAvia, a British-American company that is developing a hydrogen-electric airplane that produces net-zero emissions. ZeroAvia hopes to fly a passenger plane 500 miles by 2026. He also mentioned Enapter, a company based in Germany, which has patented an anion exchange membrane hydrogen generator, which is designed to allow the creation and storage of hydrogen energy on-site using electrolysis. Molloy also expressed excitement about GeoPura, which provides outdoor festivals, film and TV production, as well as construction projects, a solar or wind-generated green hydrogen-based alternative to diesel generators. Additionally, he mentioned that a number of companies are focused on developing more sustainable mining, construction and shipping technologies.
"I think it's a case of wherever you've seen problems or application, or decarbonization has been difficult, we’ve got a whole heap of folks that are looking at this and saying, ‘OK, does this change the calculus, and does it give us a pathway where we can push on in a whole heap of spaces? That’s certainly proven to be the case," Molloy said.